IATA: Air cargo growth continues in January but at slower pace; war likely to push up rates

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Korean Air
Airlines around the world are leaning on cargo operations to keep planes flying. (PHOTO: Korean Air)

The International Air Transport Association (IATA) released data for global air cargo markets showing slower growth in January 2022. Supply chain disruptions and capacity constraints, as well as a deterioration in economic conditions for the sector dampened demand. Global demand, measured in cargo tonne-kilometres (CTKs), was up 2.7 percent compared to January 2021 (3.2 percent for international operations). This was significantly lower than the 9.3 percent growth seen in December 2021 (11.1 percent for international operations).

Capacity was 11.4 percent above January 2021 (10.8 percent for international operations). While this is in positive territory, compared to pre-COVID-19 levels, capacity remains constrained, 8.9 percent below January 2019 levels.

Download the IATA cargo market analysis here.

Supply chain disruptions as well as a deterioration in economic conditions for the sector are slowing growth. Several factors should be noted:

  • Supply chain disruptions resulted from flight cancellations due to labour shortages, winter weather and to a lesser extent the deployment of 5G in the USA, as well as the zero-COVID policy in mainland China and Hong Kong.
  • The Purchasing Managers’ Index (PMI) indicator tracking global new export orders fell below the 50-mark in January for the first time since August 2020, indicating that a majority of surveyed businesses reported a fall in new export orders.
  • The January global Supplier Delivery Time Purchasing Managers Index (PMI) was at 37.8. While values below 50 are normally favourable for air cargo, in current conditions it points to delivery times lengthening because of supply bottlenecks.
  • The inventory-to-sales ratio remains low. This is positive for air cargo as it means manufacturers may turn to air cargo to rapidly meet demand.
IATA Director General Willie Walsh at the 2021 annual general meeting in Boston. (PHOTO: IATA)

“Demand growth of 2.7 percent in January was below expectation, following the 9.3 percent recorded in December. This likely reflects a shift towards the more normal growth rate of 4.9 percent expected for this year. Looking ahead, however, we can expect cargo markets to be impacted by the Russia-Ukraine conflict. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty are converging. Capacity is expected to come under greater pressure and rates are likely to rise. To what extent, however, it is still too early to predict,” said Willie Walsh, IATA’s director general.

SIA, like other carriers, has seen its cargo business grow, but bellyhold cargo is troubled because of the cut in passenger flights. (PHOTO: Singapore government)

The Russia Ukraine conflict will have a negative impact on air cargo. Airspace closures will stop direct connectivity to many markets connected to Russia. Overall, the impact on global markets is expected to be low as cargo carried to/from/within Russia accounted for just 0.6 percent of the global cargo carried by air in 2021. Several specialised cargo carriers are registered in Russia and Ukraine, particularly those involved with heavy lift operations.

January Regional Performance

covid-19-iata-calls-for-air-cargo-coordination
(PHOTO: Shutterstock)
  • Asia-Pacific airlines saw their air cargo volumes increase 4.9 percent in January 2022 compared to the same month in 2021. This was significantly below the previous month’s 12.0 percent expansion. Available capacity in the region was up 11.4 percent compared to January 2021, however it remains heavily constrained compared to pre-COVID-19 levels, down 15.4 percent compared to 2019. The zero-COVID policy in mainland China and Hong Kong is impacting performance. Preparations for the Lunar New Year holiday may have also had an impact on volumes, but it is difficult to isolate.
  • North American carriers posted a 1.2 percent decrease in cargo volumes in January 2022 compared to January 2021. This was significantly below December’s performance (7.7 percent). Supply chain congestion due to labor shortages, severe winter weather and issues with the deployment of 5G as well as a rise in inflation and weaker economic conditions affected growth. Capacity was up 8.7 percent compared to January 2021.
  • European carriers saw a 7.0 percent increase in cargo volumes in January 2022 compared to the same month in 2021. While this was slower than the previous month (10.6 percent), Europe was more resilient than most other regions. European carriers benefited from robust economic activity and an easing in capacity. Capacity was up 18.8 percent in January 2022 compared to January 2021, and down 8.1 percent compared to pre-crisis levels (2019).
  • Middle Eastern carriers experienced a 4.6 percent decrease in cargo volumes in January 2022. This was the weakest performance of all regions and a drop in performance compared to the previous month (2.2 percent). This was due to a deterioration in traffic on several key routes such as Middle East-Asia, and Middle East-North America. Capacity was up 6.2 percent compared to January 2021 but remains constrained compared to pre-COVID-19 levels, down 11.8 percent compared to the same month in 2019.
  • Latin American carriers reported an increase of 11.9 percent in cargo volumes in January 2022 compared to the 2021 period. This was a decline from the previous month’s performance (19.4 percent). Capacity in January was down 12.9 percent compared to the same month in 2021 and remains well below compared to pre-COVID-19 levels, down 28.9 percent versus 2019.
  • African airlines saw cargo volumes increase by 12.4 percent in January 2022 compared to January 2021. The region was the strongest performer. Capacity was 13.0 percent above January 2021 levels.

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